Will sales promotions be the death of department stores?
Have sales promotions become a “cancer” for department stores? Allen Questrom, the former CEO of J.C. Penney, thinks they have and said so in an interview on the CNBC show “Squawk Box” yesterday.
Mr. Questrom, who was credited with turning Penney around in the early 2000’s, said department stores have fallen back on sales promotions whenever business begins to slow.
“Sale[s] cannot be the only driver, it has to be a part of it. But product, presentation, excitement in the stores, the salespeople in terms of servicing the customer” all need to be part of the value proposition for department stores to succeed, he said.
Mr. Questrom pointed to Zara and Uniqlo as two clothing chains that have learned how to drive business without relying primarily on sales to attract shoppers, primarily Millennials, to stores. Department stores need to understand that Millennials, unlike their Baby Boomer parents, search for “inspiration, not aspiration” when they shop, he said.
While fast-fashion chains pose a competitive threat to department stores, the same is true of off-price retailers such as Marshalls and T.J. Maxx as well as a host of e-tailers.
Research by The NPD Group, released in July, found that two-thirds of consumers who shop for clothes do so at off-price stores. While consumers 45+ make up more than half of shoppers in off-price locations, Millennials are increasingly attracted to these shops. People between the ages of 25 and 34 represent 16 percent of shoppers in off-price outlets and their numbers are growing. Many department stores have opened their own off-price stores in response, but those moves have not directly benefited their full-price businesses.
The desire for department stores to move away from sales is not new. Former J.C. Penney CEO Ron Johnson’s failed initiative is often held up as a cautionary tale for other retailers looking to abandon discounting. After joining the department store chain from Apple, Mr. Johnson made the decision to abandon sales promotions and emphasize everyday low price. The move nearly destroyed Penney and led to Mr. Johnson’s ouster after just 17 months as the company’s chief executive.
- Ex JCPenney CEO Allen Questrom: Sales have become a cancer for department stores – CNBC
- What does it take to compete in an off-price world? – RetailWire
- Johnson era is over: What will it take to fix Penney? – RetailWire
DISCUSSION QUESTIONS: Do you agree will Allen Questrom that department stores need to focus more on inspiration rather than aspiration if they want to attract more Millennials as customers? Can department stores do this without losing the Baby Boomers that are now supporting their businesses?